Correlation Between EuropaCorp and ENSTAR GROUP

Can any of the company-specific risk be diversified away by investing in both EuropaCorp and ENSTAR GROUP at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining EuropaCorp and ENSTAR GROUP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between EuropaCorp and ENSTAR GROUP LTD, you can compare the effects of market volatilities on EuropaCorp and ENSTAR GROUP and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in EuropaCorp with a short position of ENSTAR GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of EuropaCorp and ENSTAR GROUP.

Diversification Opportunities for EuropaCorp and ENSTAR GROUP

-0.16

Correlation Coefficient

EuropaCorp  ENSTAR GROUP

Good diversification

The 3 months correlation between EuropaCorp and ENSTAR is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding EuropaCorp and ENSTAR GROUP LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENSTAR GROUP LTD and EuropaCorp is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on EuropaCorp are associated (or correlated) with ENSTAR GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENSTAR GROUP LTD has no effect on the direction of EuropaCorp i.e., EuropaCorp and ENSTAR GROUP go up and down completely randomly.

Pair Corralation between EuropaCorp and ENSTAR GROUP

Assuming the 90 days horizon EuropaCorp is expected to generate 7.8 times more return on investment than ENSTAR GROUP. However, EuropaCorp is 7.8 times more volatile than ENSTAR GROUP LTD. It trades about 0.12 of its potential returns per unit of risk. ENSTAR GROUP LTD is currently generating about 0.04 per unit of risk. If you would invest  35.00  in EuropaCorp on December 28, 2024 and sell it today you would earn a total of  14.00  from holding EuropaCorp or generate 40.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

EuropaCorp  vs.  ENSTAR GROUP LTD

EuropaCorp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EuropaCorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, EuropaCorp reported solid returns over the last few months and may actually be approaching a breakup point.

ENSTAR GROUP LTD

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ENSTAR GROUP LTD are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ENSTAR GROUP is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with EuropaCorp and ENSTAR GROUP

The main advantage of trading using opposite EuropaCorp and ENSTAR GROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EuropaCorp position performs unexpectedly, ENSTAR GROUP can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ENSTAR GROUP will offset losses from the drop in ENSTAR GROUP's long position.

The idea behind EuropaCorp and ENSTAR GROUP LTD pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.